License and Record System for Intellectual Property Rights in Taiwan

[ February 23, 2023 (2) ] >Back
The right to use property can be granted to others. For tangible property, this is called a "lease". For intangible property, it is called a "license". Unlike tangible objects, intellectual property rights (IPR) can be reproduced indefinitely. Based on this characteristic, the law divides the license of IPR into "exclusive license" and "non-exclusive license".

"Exclusive license" is so exclusive that even the licensor (right holder) himself is prohibited from exercising it, e.g., §62I of the Taiwan Patent Act, §39V of the Taiwan Trademark Act, and §37 IV of the Taiwan Copyright Act. The licensee is the only person who may exercise the IPR or re-license the IPR to others, unless the agreement provides otherwise. When the IPR is infringed, only the exclusive licensee, not the licensor or owner, has standing to file a lawsuit.

If the license is non-exclusive, the licensor may exercise the IPR himself or re-license it to others. A non-exclusive licensee has only the right to exercise. Generally, such a right may not be re-licensed unless the agreement provides otherwise (§63II of the Taiwan Patent Act, §40II of the Taiwan Trademark Act, and §37III of the Taiwan Copyright Act). A non-exclusive licensee has no standing to sue for infringements of the licensed IPR because he has no right to prevent others from exercising the IPR, and thus there are no “injuries in fact” to support his standing.

If the exclusion clause in a license agreement is missing or too vague, we seek the true intent of the parties. The intellectual property and commercial court in Taiwan has held that, to form an exclusive license agreement, there must be a clause expressly and unambiguously stating that only the licensee may exercise the IPR. If the exclusion clause in the so-called “exclusive license agreement” only prevents the licensor from re-licensing the IPR, but is silent on whether the licensor is excluded from exercising it, the agreement is non-exclusive.

Taiwan has a recording system for patent and trademark license agreements based on the race statute. No license agreement is valid against any subsequent purchaser unless the agreement is recorded (§62I of the Taiwan Patent Act, §39 II, §42 and §44 I of the Taiwan Trademark Act). An unrecorded license agreement binds only the parties to the agreement. On the other hand, a recorded license agreement binds both the parties and the subsequent purchaser. Note that recording is not a prerequisite to make a license agreement valid and enforceable, and an unrecorded exclusive license agreement is as valid as a recorded one. Thus, if a right holder re-licenses his right after entering into an exclusive license agreement, the subsequent license agreement is invalid even if it is recorded first, for the reason that there is no right left for the right holder to re-license. Also, the recording system provides no protections for tortfeasors. An exclusive licensee may file a suit against a tortfeasor, and the lack of a record of the license agreement is not a good defense.

Unlike patents and trademarks, Taiwan has no recording system for copyrights or its license agreements. However, surprisingly, §37II of the Taiwan Copyright Act expressly stipulates that a copyright license agreement is valid against any subsequent purchaser, with or without notice. If a copyright holder sells his copyright to a subsequent purchaser, failing to disclose that the right to exercise has been completely deprived due to an exclusive license agreement, the only remedy for the subsequent purchaser is monetary damages for a breach of the purchase contract.

It is difficult to find out whether there is a license agreement attached to the copyright. Generally, notice of the situation of property may be obtained by three means: by actual knowledge of the property (actual notice); by reasonable inspection upon the appearance of the property (inquiry notice), or by authoritative record (constructive notice). However, in a copyright transaction case, a purchaser will have a hard time obtaining any notice of the existence of a license agreement. There is no constructive notice because there is no record system for copyrights. There is no inquiry notice because possession of copyrights is not physical.

Therefore, it is highly recommended to conduct a thorough research or consult with attorneys specializing in the Taiwan Copyright Act before buying copyrights in Taiwan. It is important to be aware of any potential license agreements that may affect the rights granted by the copyright, and to take steps to protect oneself from any legal disputes or issues that may arise.

Tsai-Yi-Ta  Attorney at law